Auditing national debt increasing complexity and importance Size of the national debt political interest Failure to accurately auditing the true level of national debt crisis Significant impact on governmental services

National Audit Office (NAO) four part approach: Defining what the national debt includes Auditing debt issuance/raising activities Audit of outstanding debt Other assurance activities

Definition sets the remit for a national debt audit function. No appropriate definition risk that audit does not cover all relevant areas Knowledge of omission of significant area of activity Less willing investors Higher premium to fund states activities in the future

UK major issuer of sovereign debt National debt financial instruments quoted in an active market National debt included loans from other states Asset/liability position with the International Monetary Fund Matter of political debate

All central government debt UK Debt Management Office (DMO) Various classes of debt with maturities of three months to fifty years Types and timing of debt issued and individual operations discussed and agreed in advance with main purchasers of UK Government Debt

Audit approach Confirm that DMO acts within remit set by Parliament Revise auction process each year designed to accurately record debt issued and prices paid Auction process designed effectively test controls in operation over the year of account Effective operation throughout the year

Assessment and testing of controls over public information debt issuance activities Incorrect information put out loss of investor confidence and higher prices to raise debt

Testing results of each auction to confirm correct amount/type of debt issued and cash received recorded in the accounts Review register of interests no-one involved in issuing UK Government debt has contacts or interests avoid insider trading

Auditing the DMO focus issue of UK sovereign debt held by the markets Gilts and Treasury Bills Continuous auditing historic assurance over opening balances Rather than starting from scratch each year

Record management Who holds what debt Paying interest to holders of UK government debt Outsourced by DMO private company (Gilt Registrar) NAO audit access rights to Gilt Registrar Periodic visits effective control framework DMO monitoring of the gilt registrar performance and contingency plans poor performance

NAO substantive testing of the UK Gilt liability UK national debt too large to test every item Statistics team select a representative sample Substantive assurance over the value of the overall debt Confirmation of correct disclosure of national debt value Accounts following International Financial Reporting Standards

Sensitivity of the national debt NAO performs other related work Requested by Parliament Public interest to do so This work includes: Briefing Members of Parliament issue and management of national debt Auditing future debt assumptions Piece studies on topical issues UK governments response to the banking crisis